Um compêndio de importantes regulamentações ESG.

encourages climate risks to be managed within an institution’s overall business strategy and existing frameworks including risk appetite statement, risk management strategy and business plan, with disclosure according to the TCFD.

‘encouraged’ guidance

Issued 2021

Observance is “encouraged”

Applies to investors and operational companies in Japan and abroad.

Guidance

Issued 2020

Regulated financial service providers.

Requirement to consider, then with18 months to complete the necessary preparations (to appoint a risk manager with the purview to work independently and formulate and obtain the board of directors’ approval for a risk management plan.)

Published June 2022

CMISA (Capital Markets, Insurance and Savings Authority)

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The Capital Markets, Insurance and Savings Authority has not set uniform parameters, in order to avoid determining the analysis for the institutions, and to let them set their methodology in accordance with the method that seems best to them

A reference for the fundraiser, the financier, and other market participants when they consider concrete actions to transition finance.

Guideline

Issued 2021

Is consistent with he International Capital Markets Association (ICMA) “Climate Transition Finance Handbook”

Issued recommendation to government

Two to five years

• Recommended issuers be required to disclose material ESG information, in particular on climate change
• Endorsed certain standards of the Taskforce on Climate-Related Financial Disclosures

Guidance

Oct. 2021

In 2019, the UK became the first major economy to commit in law to net zero greenhouse gas emissions by 2050. In 2021, the government set in law to cut emissions by 78% by 2035 compared to 1990 levels.

Fund Managers managing collective investment schemes.  requirements cover governance, investment management, risk management and disclosure.

Mandatory

Published 2021

Represent a notable departure from existing Business Responsibility Reports

Financial institutions to consider ESG (environment, social, and governance) factors and developing risks (such as cybersecurity and technology risks) insofar as they might affect the performance of an investment portfolio

Requirement to present ESG procedures and policies and publish them annually.

Published Nov 1, 2021

CMISA (Capital Markets, Insurance and Savings Authority)

CMISA has not set uniform parameters, and has let institutions set their own methodology as seems best to them

Affects all financial market participants in the EU

Identifies three social objectives:

• Decent work (including for value chain workers) 
• Adequate living standards and well-being for end-user
• Community inclusion 

Includes sub-objectives of: health and safety; healthcare; housing; wages; non-discrimination; consumer health; and communities’ livelihoods

Emphasises:” do no significant harm”

Report presented to the European Commission, 28Feb 2022

This is an important effort to align two taxonomies (E and S) and avoid conflicting end objectives between environmental and social sustainability, and to allow investors to compare how funds are aligned with either taxonomy.

The creation of a social  taxonomy will soon lead to the establishment of consistent social metrics.

ASEAN is composed of ten member states, which exhibit varied standards of development and economic activity. The taxonomy is intended as the reference point for sustainable projects and activities in ASEAN, to help issuers and investors understand the sustainability impact of a project or economic activity, to result in a more informed and efficient decision-making process

Version 1 is meant to provide a framework for discussion.

Issued 2021

With differing states of development, as well as varying economic and social structures of the ASEAN Member States, it is critical for the ASEAN Taxonomy to facilitate an orderly transition at all levels towards a sustainable ASEAN.

• To show progress to targets, may use traffic light approach as well as metrics.

Applicable to the top 1000 listed entities

Include an overview of material ESG risk and opportunities (including an entity’s approach to mitigating or adopting to the risks along with financial implications); sustainability related goals/targets and performance against these; and specific environment and social related disclosures.

Issued 2021  voluntary for FY 2021-2022  mandatory from FY 2022-23

Securities & Exchange Board of India (SEBI)

This Guidance Note develops a set of common considerations for the investment management industry on the following topics: 

• approach to assessment of emissions in portfolios, setting net-zero targets and aligning portfolios to net zero targets; 
• appropriate product labelling and avoidance of greenwashing; and 
• application of Taskforce on Climate Related Financial Disclosures (TCFD) reporting to asset managers

Provides up to date guidance

Effective as of 3 August 2022

The Japanese Financial Services Agency has addressed these concerns with this Code of Conduct

Guideline

Draft issued 12 July 2022. – public comment closed 5 Sept 2022

Awaits publication

Companies listed on the Egyptian Stock Exchange, and companies operating in non-bank financial activities

To submit environmental, social, and governance disclosures related to the financial effects of climate change in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD)

Mandated with 2023 annual report

The decree presents two levels of compliance: Listed companies and non-banking financial companies with issued capital of at least EGP 100 mn need to make an annual ESG disclosure, and listed companies and non-banking financial companies with issued capital of at least EGP 500 mn or more will need to report on performance indicators that align with recommendations from the TCFD.

HKEX listed companies

Voluntary

Published 2021

Applies to all financial market participants (“FMPs”) and financial advisors (“FAs”) in the EU. Includes investment and mutual funds, UCITS, insurance-based investment products, and pensions

Disclosure of:

• The adverse impacts of investment decisions on sustainability factors
• Consideration of sustainability (ESG) risk in investment processes
• Provision of sustainability information with respect to financial products

Applies from 10Mar2021.  

Some taxonomy-related product disclosures from 1Jun2022

Mandatory

Implementation has been complicated by concomitant development of taxonomy.

Official classification or catalogue that defines a minimum set of assets, projects, and sectors that are eligible to be defined as "green" or environmentally friendly

Launched April 1, 2022

• Provides clarity and certainty in selecting green investments in line with international best practices and national priorities and standards;
• Helps unlock large-scale capital for climate-friendly and green investment in South Africa by increasing the credibility and transparency of green activities;
• Reduces financial risks through enhanced management of environmental and social performance;
• Reduces the costs associated with labelling and issuing green financial instruments;
• Supports regulatory and supervision oversight of the financial sector.

EU-companies which have: 

• more than 500 employees and a net worldwide turnover of more than EUR 150 million; or
• more than 250 employees and a net worldwide turnover of more than EUR 40 million—provided that at least 50% of this net turnover was generated in a “high-risk” sector 

Non-EU companies which have: 

• net turnover of more than EUR 150 million in the EU; or
• net turnover of more than EUR 40 million but not more than EUR 150 million, provided that at least 50% of its net worldwide turnover was generated in one of the “high-risk” sectors noted above

even if they do not have a physical presence in the EU.

• Integrate due diligence into policies.
• Identify actual or potential adverse human rights  and environmental impacts (that run contrary to multilateral environmental conventions), arising from their own operations or those of their subsidiaries and, where related to their value chains, from their established business relationships 
• Prevent or mitigate potential impacts, bring to an end or minimise actual impacts.
• Establish and maintain a complaints procedure.

• Monitor the effectiveness of the due diligence policy and measures  
• Publicly communicate on due diligence.

Public enforcement => Member State National Authorities fines 

Private =>  civil liability claim  

23Feb2022  Proposed to EU Parliament and Council  – awaiting approval

Once adopted, Member States will have two years to transpose the Directive into national law

Will take until late 2024 - early 2025 to be turned into national laws….

Guidance

Update 2020

Provides companies an up-to-date roadmap on environmental, social and corporate governance (ESG) issues

Guideline

2020

Large financial institutions including banks, registered investment schemes, licenses insurers, issuers of equity or debt securities, and listed NZ companies

To produce climate-related disclosures. Reporting must be against the standards issued by XRB, which will be developed in line with the TCFD

Must make disclosures on their 2023 financial year by 2024 (at the earliest)

“One way of reading the Climate Change Commission’s draft advice is as a warning that high-carbon investments will be increasingly risky as we get closer to meeting the Government’s climate targets,”

Includes a $7500 tax credit for electric vehicles

Requires portions of critical battery materials to be extracted or processed in the United States

By 2026, vehicles will need to have 80% of critical materials sourced domestically or from a country with which the US has a free trade agreement.

• Materials account for 2/3 of EV battery costs.
• Cobalt unlikely to contribute to qualifying for credit, but lithium and to a much lesser extent nickel will contribute
• This could lead to greater penetration of lithium iron phosphate batteries (no nickel, no cobalt)

For Singapore-based financial institutions, with particular relevance to those active across ASEAN Member States

Issued 2022

After consultation with stakeholders, the issued version expands on a traffic light approach, and adds thresholds for classification.

Recommendations for companies to disclose how they manage the financial risks and opportunities that climate change poses to their business

Provides recommendations and guidance on disclosures in: governance; strategy; risk management; and metrics and targets.

Published in 2015

The recommendations from this early task force are now considered ‘foundational’, and are being referenced and gradually implemented across the globe

Includes definitions, benefits of reporting ESG aspects, recommendations for preparing a sustainability report, standards, international methodologies and performance indicators

Guideline

2021

Listed companies

Requires every issuer to prepare an annual sustainability report, which must describe the issuer's sustainability practices with reference to the primary components set out in Listing Rule 711B on a 'comply or explain' basis

Updated 2020

Applies to all companies listed on US security exchanges

Significant increase in reporting on climate risk required:

• Disclosure of material climate risks and impacts;
• GHG Scope 1 & 2, with 3 if material; targets or transition plans
• Targets for energy use, emission reduction, nature conservation, and use of offsets.

Under final review by SEC following close of Public comment 17June2022

First reporting due with Fiscal 2023 yearend (in 2024)

A significant number of public entity corporate tenants, real-estate lenders, and real-estate investors will have to make disclosures about their real-estate holdings. Given that real estate accounts for a significant component of scopes 1 and 2 GHG emissions, compliance will include the emissions that come from real-estate footprints. If enacted, the SEC’s rule would mean both public and private real-estate companies must provide this insight to their tenants, investors, lenders, and other stakeholders.

Applies to all companies employing at least 3,000 employees (1Jan2023) and at least 1000 employees 1Jan2024

Companies’ responsibility is to extend along their entire supply chain, graduated in line with the opportunities they have to exert an influence. Companies must realise their obligations in their own field of business and vis à vis their direct suppliers. Indirect suppliers are involved as soon as the company receives substantiated reports of human rights violations at that level.

• Establish a risk management process
• Conduct risk analysis
• Publish a declaration of principles (Grundsatzerklärung) and implement preventive measures
• Implement counter measures
• Establish grievance mechanisms
• If a company gets “substantiated knowledge” about risks with indirect suppliers, they have to conduct risk analysis, preventive measures, measures to minimize the risk, and update their declaration of principles
• Publish a yearly report

• scheduled to go into effect on 1 January 2023
• The Federal Office of Economics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle) is responsible for the implementation and enforcement of the law
• Violation could bring fines of up to 2% of annual revenue

The law asks for “adequate/appropriate” measures. What this would look like depends on the:

• Type and scope of a company’s business activities
• Degree of influence of a company over the company violating human rights
• Severity/reversibility of the violation/potential violation 
• Type of contribution to a risk for human rights/ the environment

Government and industry

Guidance

Issued 2020

“We are the global standard setter for impact reporting. We follow an independent, multi-stakeholder process. We maintain the world’s most comprehensive sustainability reporting standards. Our Standards are available as a free public good.

“Sets the tone for transparency.”

This is a voluntary standard. Standards have been used internationally in ESG reporting for some time as one of the two primary reporting formats

Will be interesting to see if, and how well, GRI and ISSB standards harmonize once ISSB completed (see ISSB)

EU estimated 800-1000 companies would be affected by this regulation

Requires importers to follow OECD Due Diligence Guidance for Responsible Supply chains from Conflict-affected and High-risk Areas

Took effect 1 Jan 2021. Enforcement by each EU Member State Responsible Authority

• Significant lack of visible  reporting of the results of National Responsible Authorities’ activities
• In March 2022 the EU closed a call for tender to “Review the functioning and effectiveness” of the regulation.

Companies that are publicly traded in the US

Annual report to the SEC that demonstrates the efforts to identify the sources of the 3TGs used in their products

Implemented 2014

In 2017, the SEC stated that it would suspend enforcement of the due diligence and audit requirements of the conflict minerals regulation

Propose 13 topics, in considerable granularity, for sustainability impacts, risks and opportunities (i.e. greater scope and detail than ISSB or SEC).   The reporting reflects on the company’s impact on the economy, environment and people.  Also categorises information differently from TCFD or ISSB.  Metrics address EU policy objectives.

Company scope will be the same as the EU Directive on Corporate Sustainability Reporting (CSRD)

same as the EU Directive on Corporate Sustainability Reporting  (CSRD)

• EFRAG plans to release 40 industry-specific standards in 2023
• phased introduction beginning Jan 2024
• will require limited assurance initially, moving to reasonable assurance over time

• Lack of conformity between ISSB and EFRAG in terms of industry classification system used (SICS vs NACE) will require mapping between systems
• ESDRs include the concept of double materiality and expand a company’s reporting boundary to its entire value chain.

Applies to listed companies (a traded company, a banking company, an authorised insurance company and a company carrying on insurance business which in each case satisfy various conditions, including that of having more than 500 employees)

Requires disclosure in line with TCFD recommendations

April 2022

Companies Act

Specifies six environmental objectives :

• Climate change mitigation 
• Climate change adaptation
• Sustainable use and protection of water and marine resources
• Transition to a circular economy
• Pollution prevention and control 
• Protection and restoration of biodiversity and ecosystems

Effective 01 Jan. 2022 for climate change mitigation and adaption.

The remaining 4 will be integrated effective 1 January 2023

Asset managers and financial advisers need to disclose the degree to which they commit to being invested in taxonomy-aligned activities within their financial products. 

As a result:

• Companies have clearer guidance on sustainable finance initiatives and regulation, which helps in strategic planning and raising capital for these projects.
• Investment managers can design credible green products that meet the approved common standards. 
• Retail investors can better compare financial products based on EU TR-aligned activities. Professional investors (portfolio managers) can better compare companies through improved disclosure of EU TR-aligned activities

All companies listed on EU regulated markets, large companies meeting two of these three:

• a balance sheet total of > EUR 20,000,000
• a net turnover of > EUR 40,000,000
• an average of >250 employees. 

Extraterritorial companies listed on EU markets along with  their EU domiciled subsidiaries.

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Reporting reflects a ‘double materiality perspective’,  reflecting both the inwards and outwards impacts of a company impact/impact materiality = outwards). 

Companies are to report on:

• Strategy & business model and its resilience
• Sustainability targets & indicators set, and progress to them
• All environmental-related matters that are affected by or affect their business
• Social considerations (working conditions, human rights, etc.
• Governance processes; 
• External and internal risk management

Passed EU Parliament 21Jun2022

Oct31, 2022   First set of standards:  guidelines on double materiality and on information quality.

Oct31, 2023  Second set of standards:  Connectivity, levels  of reporting; retrospective/ prospective information, and  Public Good

This is an important step in the EU development of a regulatory framework

It will enable the setting of performance and information requirements for almost all categories of physical goods placed on the EU market

The framework will allow for the setting of a wide range of requirements, including on

• product durability, reusability, upgradability and reparability
• presence of substances that inhibit circularity
• energy and resource efficiency
• recycled content
• remanufacturing and recycling
• carbon and environmental footprints
• information requirements, including a Digital Product Passport

Draft published 30Mar2022

• The new “Digital Product Passport” will provide information about products’ environmental sustainability. It should help consumers and businesses make informed choices when purchasing products, facilitate repairs and recycling and improve transparency about products’ life cycle impacts on the environment. The product passport should also help public authorities to better perform checks and controls.
• The Commission has stated it would start legislating for high-impact industries with gaps in sustainability rules, such as textiles, furniture, mattresses, tyres, detergents, paints, and lubricants, iron, steel, and aluminium.(see EU COMMUNICATION FROM THE COMMISSION: On making sustainable products the norm   COM_2022_140)

any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the XUAR

Proof that the Scope has not been transacted

CBP activity commenced June 22, 2022

preliminary determinations should start arriving by August 29 ,2022.

Enforcement: US DoL, CBP

• The Obama administration imposed tariffs of 250% on solar modules from China.  China then moved the majority of production (or shipping) to: Malaysia-31%, Vietnam-29%, Thailand-26% and Cambodia-6%. It should be interesting to see if this sourcing is identified by USCBP.
• It will take several months to see the extent of application of the Act as well as the implications for the need for good traceability
• The solar industry has been strangely silent on the topic....

The  ISSB is tasked to set up sustainability standards give a global baseline to  high quality, transparent, reliable and comparable reporting by companies on climate and other environmental, social and governance (ESG) matters. The inclusion of the former SASB in the Board gives an industry focus to the development of sustainability standards.

IFRS S2 Climate-related Disclosures (Climate Exposure Draft) builds upon the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and incorporates industry-based disclosure requirements derived from SASB Standards

IFRS S1 General Sustainability-related Disclosure Requirements and IFRS S2 Climate-related Disclosures drafts were released 31Mar2022; feedback closed 31July2022; under feedback review H2 2022; issue planned yearend 2022.

• IFRS S1 sets out the overall requirements for an entity to disclose sustainability-related financial information about all its significant sustainability-related risks and opportunities, to provide the market with a complete set of sustainability-related financial disclosures.
• IFRS S2 builds upon the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and incorporates industry-based disclosure requirements derived from SASB Standards.

Guidance

Issued 2019

This guidance was originally created by the Sustainable Stock Exchanges Initiative and translated into Japanese by Japan Exchange Group.

All listed companies

Comply or explain

2019

Philippines Securities and Exchange Commission

Guidance

2022 update to TCDF

Users identified: financial impacts on capital expenditures and allocation; and financial implications under different climate-related scenarios, as the most useful to disclose.

For all bonds that are marketed as green, transparency requirements are introduced, including being aligned with the taxonomy legislation on the use of proceeds derived from the bond issuance

To avoid ‘brown’ companies (i.e. with highly polluting industries) using the EuGB label to pretend to be greener than they really are, the amended proposal requires that all EuGBs have verified transition plans. The text also ensures that all issuers of green bonds have processes in place to identify and limit the principal adverse impacts of their activity. Finally, it prohibits all issuers from countries that are on the EU’s grey or blacklist of tax havens from issuing EuGBs

Economic and Monetary Affairs Committee proposed changes 17May2022.

under negotiation with Member States 8Jun2022

To be a helpful reference material for companies wanting to improve their mid- to long-term corporate value by understanding ESG and the spread of ESG investment, progressing their ESG activities in a way fitting to the company, and enacting dialogue with investors and other stakeholders.

Guidance

March 2020

Published by Japan Exchange Group, Inc. and Tokyo Stock Exchange, Inc.

See proposed Ecodesign for Sustainable Products Regulation

ESG reporting is not just for larger companies. This is about all issuers, regardless of size, reporting relevant and material information to investors so that they can make better informed investment decisions

Guidance

Published2020